Cheers echo for FDI

The cabinet has approved 51% FDI in multi brand retail, vesting the decision in the hands of state capitals. What does this move spell for Indian retail?
Cheers echo for FDI

Finally the speculation on the much awaited allowing of 51 per cent FDI in multi-brand retail comes to an end with the cabinet allowing the same. The mood is upbeat within the retail industry and speculations amongst the industry stalwarts are already making rounds about which labels will make an India entry and how much money will pour in. The Indian retail sector stands at about $450 billion with organised retail accounting for around five per cent of the total market. These numbers too will go higher, post this move. Harish Bijoor, Brand-expert & CEO, Harish Bijoor Consults Inc. rightly put it. He says, “India has opened up at last. At least to  a partial degree of world economic comfort. Full convertibility of the rupee will signal the complete opening up of India. The level playing field is finally here. Well nigh nearly. I say that because individual States will still stall the process. Local players in retail have had it good thus far. Now, it’s time to compete. Finally it’s time to stop plucking the low hanging fruit of opportunity alone and reach out and grab the higher hanging fruit. And when you try for this, you will now compete with the best in the world. We are therefore one step closer to the Walmartization of India!”

Government gets the applaud

The government for sure in winning applause from the industry who are all praising the government for its move. Raj Jain, President Walmart India and MD and CEO, Bharti Walmart says, “We believe that allowing 51 per cent FDI in multi-brand retail is an important first step for Government to further liberalize this sector.  We are grateful that the Government has realized and appreciated the value that we will bring to strengthen the Indian economy.   This policy change will allow us to connect directly with the consumer and save them money.”
 
Harsh Pati Singhania, Director, JK Organisation & President, International Chambers of Commerce, India & Past President, FICCI   says, “Government should be complimented for bringing back economic reforms on the agenda. It is a bold move putting national interest ahead of political considerations. Government has tried to tackle many important issues e.g. subsidies (diesel price hike), revenue generation (disinvestment), taking long term measures to bring efficiency in the food supply chain (multi-brand retail). The moves announced in the last two days will help reviving market and investment sentiments as also enable economic growth and bring foreign investment into the country.” Agreeing Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield comments, “In a period, when we are learning only about poor economic performance on various fronts, this decision will serve to boost overall sentiment and the economy. Not just within India, but also internationally, the decision will be taken notice of and applauded. Within the next 12-24 months, international retailers will accelerate their entry strategy. As a result, the developers involved in shopping centre development, who were badly hit since 2008, will also get a tremendous boost and we will witness serious players expanding in this space.”

States: The king

The states are now the king to the decision where the government has left the decision in their hands. Dipak Agarwal, Chief Executive, Operations & strategy, DLF Brands says, “It’s a good move, and at least we have begun. The government has taken a bold step and in the right direction. Now we have to see how states co-operate to this policy.”

The states have to look at the horizon and take this forward. Commenting on what role states should play, DK Jairath, CEO, Evok says, “It is a balancing act between the polity and the economy. The states will now have to think progressively and understand the larger picture and not short term benefits. There should be consistency in policy between states.”  

The details are still under covers and can change the game if they run parallel. Kumar Rajagopala, Chairman, Retailers Association of India says, “At RAI, we are happy about the announcement. Now the need is to understand what kind of money will be coming and which brands plan to enter the Indian market. Initially, there will be nuances around the state wise freedom of implementation and non implementation and also around 30 per cent procurement policy. The clarification of the norms for the 30 per cent sourcing clause for single-brand retail has come across after a really long time. Hopefully, it’s not the case here and the clarity comes in sooner.” Giving the farmers perspective, Ajay Jakhar, Chairman, Bharat Krishak Samaj says, “We are not exactly thrilled as we would have hoped for more conditions to help farmers become a part of India's growth story.” However, Pankaj Renjhen, Managing Director - Retail Services, Jones Lang LaSalle India has something else to say. He informs, “The increased flow of capital, if used effectively, will benefit both the farmers and the consumers. Farmers will benefit from the better price indexing and direct selling to the retailer. The consumer, in addition to having a better shopping experience, will benefit from the competition and the resultant reduced prices.” 

Boost to Back end ops

Increased investments will give a kick to the back end operations for the retail industry. They will move a notch higher as the retail environment get s more competitive and they have more funds at their disposal. Vikram Bakshi, Managing Director, Mc Donald’s India commented at the Retailers Networking Meet organised by Retailers Association of India said, “"Much awaited 51 per cent FDI is announced, This was required for the infrastructure developments which include cold chain, supply chain, logistics, and also for marketing and promotion. Retailers welcome this particular decision by the government." The pouring investments will give the retailer more power to work on the right pathway to ensure a better product. Govindraj V, Vice President - Integrated Retail Services at Titan Industries Ltd says, “With more investments coming to retailers, they will be able to control their wastages and be able to meet the requirements and offer the customer a quality product at the right price. Procurements too will improve and the intermediaries will be removed, adding to the business.” Adding Renjhen says, “FDI will be a powerful catalyst to the required growth in the retail industry and, in long term, will prove beneficial to all the major stakeholders. The new policy can benefit both foreign retailers and their Indian partners. The benefits to foreign players will be access to local market knowledge and an increased consumer base, while Indian companies will benefit by global best management practices and technological know-how. There will be investment in storage and transportation infrastructure, technology and supply chain operations.”  Bharti Walmart is all out to do its bit for the industry. Jain says, “By being ‘stores of the community’, we will also help them live better. We are willing and able to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation. Through these, and several other initiatives, we hope to make a positive impact on the lives of the people of India.”

E retailers rejoice

The ecommerce sector too is pleased about the move and is jubilant. E-retail today is all about offering everything under the sun on one website. They are the biggest examples of multi-brand retailers doing an excellent job. Opening of the FDI is surely going to add a feather to their hat, however the concerns remain the same.  K.Vaitheeswaran, Founder & CEO, Indiaplaza says, “We look forward for the further increase in the share, up to 100 per cent. However the additional rule that the state government must also approve the entry of international retail chain may be a dampener.”  

Consumer gains

The customer wills surely gain out of this as they will have greater access to many more international labels. Competitive pricing and better quality will also add to their retail experience. Shobana Kamineni, Executive Director - Special Initiatives, Apollo Hospitals group said, "It will benefit the consumer most in terms of better price and superior offerings. Current retail chains such as Apollo which dominates pharma retail and is Profitable has options of partnering with global players to unlock shareholder value and/or expand even faster and/or explore new retail formats." Agreeing, Rajagopala says, “The overall economy will improve offering more employment opportunities for people. Customers too can lay hands on a larger number of international brands.” Jairath too in emphasizing on how customers will gain of this move, adds, “The higher demands will come as people will get more choice, pricing and experience.”

The mood is happy and the sentiment is high, what we have to watch out for are the intricacies of the policies and how they will turn out.

 

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